ByMark J. Guillen, writer at

Netflix, Inc. (NFLX) stock has surged 2.21%, after Nomura raised the target price on the stock from $600 to $750

Netflix Inc. shares are up yesterday, followed by Anthony Di Clemente, an analyst at Nomura Securities bullish stance on the streaming giant in a research note issued to investors published yesterday. Mr. Cliemente pointed out his latest country by country model which shows that Netflix might reach the potential overall addressable market of almost 725 to 730 million households by the end of 2020. Nomura Securities reiterated a rating of Buy and increased the stock price target to $750 from $600 on Netflix shares.

On the basis of 725 to 730 million households covered, Mr. Cliemente expects the company’s penetration to reach 94 million subscribers globally. He also believes that rising international contact licensing will offer the company robust operating margins, more than the consensus forecast in the future. The analysts outlined three long term drivers of Netflix growth: leverage from international contact licensing, opportunity of growth in current markets, enhanced operating leverage, and untapped market of China.

Highlighting the enhanced operating leverage opportunity from international licensing contracts, Mr. DiClemente write that global subscriptions in the future are expected to offer at par or even better operating margin than domestic subscriptions. He also said that company’s international user subscription licensing will be expanded to a large number of users. He estimates 35% of global contribution margin.

China is becoming as the upcoming growth opportunity for mostly United States companies. Mr. DiClemente said that China can be a potential contributor to the streaming giant, and forecasts that the company is expected to reach 4.5% of penetration in the region. He added that China has 10 million of potential subscriptions and has the ability to become the biggest international market of Netflix.

However, Alibaba Group Holding Ltd recently declared that it is looking forward to start service like Netflix in the upcoming months, Alibaba holds 80% of the Chinese markets and approach into streaming business might have huge allusion for Netflix’s plans in China.

Because of this, Mr. DiClemente outlined the upside left in Netflix’s current markets. He stated: “While recent focus has been an opportunity in new international markets, we estimate the average YoY growth across Netflix’s current five largest international markets should equate to a 20%-25% CAGR through 2020E. We estimate that these markets, including the UK, Canada, Brazil, Germany, and Mexico, will comprise 35%-40% of net additions through 2020E and provide a significant runway for user growth in and of them.”


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